Govt sees GDP growth surging past 9% mark

India's economic growth could surge past the nine per cent mark during the current financial year itself, according to the revised forecast in the mid-year analysis of the economy tabled by finance minister Pranab Mukherjee.

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Mail Today Bureau

New Delhi

December 8, 2010

UPDATED: December 8, 2010 08:07 IST

India's economic growth could surge past the nine per cent mark during the current financial year itself, according to the revised forecast in the mid-year analysis of the economy tabled by finance minister Pranab Mukherjee in the Parliament on Tuesday.

The analysis raises the gross domestic product (GDP) growth forecast to 8.75 per cent, with a 0.35 per cent variation on either side, that could bring the growth rate close to the pre- crisis boom years.

The government's economic survey released in February this year had projected an 8.5 per cent ( plus or minus 0.25 per cent) growth rate but with the better- than- expected 8.9 per cent growth clocked in the first half of the current fiscal the figure has been revised upwards.

" With the effects of the 2008- 09 global economic crisis dissipating and recovery from last year's severe drought, the growth outlook for the current year is improving. Inflation had been trending up but is beginning to come down. We expect, therefore, that the economy will soon reach pre- crisis levels," the finance ministry's analysis states.

However, the analysis says that sustaining such high levels of growth for a number of years will require significant deepening of reform initiatives.

Inflation has dropped to 8.6 per cent in October this year compared to 11 per cent witnessed in April 2010. "I am hoping that inflation will come down to six per cent by March 2011," Mukherjee said.

India's economic growth rate had slowed to 6.7 per cent in 2008-09 due to the global financial meltdown, after having grown at over nine per cent for three years in a row. The analysis states that the economy is robust with a broad- based recovery across all three sectors - agriculture, industry and services.

The government's chief economic adviser Kaushik Basu said the upward revision in the growth rate is based on the economic performance during the first two quarters. Besides, the index of industrial production (IIP) figures have also been good.

Asked about the wider 0.35 per cent range in the forecast compared to the 0.25 per cent in the Economic Survey, Basu said, " The allowance for the 0.35 per cent variation is due to two reasons - if the situation in developed countries improves the nine per cent growth is possible but the situation in European Union ( EU) is worrying and the crisis in Ireland may spill- over to Italy, Spain and also Belgium.

So, it was decided to expand the range of the forecast." Basu said the high unemployment situation in countries like the US and Spain is also a cause for worry. Basu is optimistic on inflation coming down, which will help the economy to grow at a faster pace as the Reserve Bank of India ( RBI) will not have to cut money supply, which tends to choke demand.

The analysis also points out that the country's fiscal consolidation is now progressing faster than expected and is in line with the target for reducing the fiscal deficit to 5.5 per cent of the GDP in 2010- 11.

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